Brief rally over; longer term bear mkt to continue: Sukhani

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The market's fall back into the red yesterday signaled the end of the brief upmove, says Sudarshan Sukhani of s2analystics.com. "It's not looking very good for the bulls," he said, adding that the longer term downtrend in the market is set to continue.

Below is an edited transcript of his interview with Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying videos.

Q: We managed to defend 4,700 yesterday, but how is it looking for a Nifty trader this morning?

A: It's not looking very good for the bulls. Quite obviously the reverse is hereand the bears are probably sensing that they are going to get control again. We had the most tepid of rallies and that rally seems to be fizzling off, so the downtrend which we have been seeing for the year continues and the brief up move is probably over.

Q: One of your first buys today is AB Nuvo ?

A: Yes. AB Nuvo is a falling knife trade. It's been a stock that has outperformed the market over the last one year and now has gone through what I assume is a deep correction rather than a bear market. So a stock that corrects deeply but is otherwise healthy on the long-term charts should be bought when we sense that the correction is over.

The caveat here is that if the Nifty doesn't actually move up, I don't think Birla Nuvo is going to do anything special. So you need to buy it only if the market begins to go up. But otherwise, it's an outperformer and I think you don't sell it in any case.

Q: I noticed that you don't have any large cap stocks in your list. Is it really difficult to take a call on some of these Nifty names because of expiry today?

A: Yes, that's a very fair question. Because of expiry, the market can do anything today and sometimes they go absolutely volatile depending on what the F&O position is.

The second reason is that the Nifty itself is controlled and governed by these large cap stocks. The Nifty is not giving any clear signal; the only signal it's suggesting is that it is ready to break down, but that's also not very clear. So for the day, it is wise to avoid large caps till we know the exact direction in which we are going.

Q: You have a sell call on Sun TV for the morning. Tell us about that one?

A: Sun TV fell three-four months on the back of 2G news and everything else and since then it has been moving in a trading range. Now in a trading range, what we do is we try to sell on a rally and then buy when it dips. We have already seen whatever little rally Sun TV had, so at this point we are looking for the stock price to come down to support levels, which means drift to the lower end of the trading range.

Since the broad market also appears to be weak, Sun TV is a reasonably sensible shorting idea. I have a day trading target of Rs 265, but I suspect it can go all the way down to Rs 240-245.

Q: Videocon hasn't been very active of late but that's looking like a sell as well this morning?

A: It is. It's not been active, but it's not been going up either. It did not perform well when the market was going through its very small up move, so it's almost ready to go and begin a new down move as it breaks down from support levels. So Videocon becomes a short selling idea.

Again the intraday targets are modest at Rs 167 with a tight stop, but I suspect this level is not going to hold and position traders will probably hold onto the short position if it closes in their favor.

Q: The final one on your sell list is Orchid .

A: Yes, it's been a big disappointment. It went on breaking support levels and we went on giving sell signals in it. At the Rs 140-150 range, there was a suggestion that probably the worst is over, but it's not. It's ready to begin another leg of the decline that we have already seen and that's worrying.

Orchid Chemicals is a short selling idea. I don't know whether it's going to stop even at that target of Rs 124, and I suspect before the bear market ends we will see it in double digits.

Q: As a buy idea you have Aban Offshore for the day. But would you suggest buying it even for the medium-term, because it's fallen about 60% this year?

A: We know stocks that fell 60%, but then went on to 60% more. So clearly this is not a good time to buy anything for the medium-term except for the blue chips which can be purchased for an investment portfolio. I would not suggest Aban as a buying opportunity for the medium-term.

You are right, it is suggesting that the worst seems to be over, but we have seen how these stocks have turned turtle and began another leg of the down move. So we are taking a probing trade; today seems to be a good idea to buy Aban. Take a small modest target of Rs 354, but for the intermediate term it's better to wait.

Q: You have a buy on Divis Laboratories for the day as well.

A: That's a dream. It is a stock you really want to buy no matter what the Nifty does. It's true that if the Nifty were to fall you can buy it at a lower price, which means you can buy it at a more favourable price. But beyond that, Divi's Lab at Rs 780 is ready to break out and begin a new bull market of its own. You want to track it and you want to go long in it.

Q: If we open closer to this 4,680 level, what kind of trade would you initiate?

A: It's a difficult answer because today we also have F&O expiry. The Nifty is giving almost clear signals that it's unable to cross the 4,800 hurdle. So the trade here is to go short in the Nifty. Ideally we should sell below 4,640, but then the market doesn't always oblige us one way or other.

So we sell Nifty at the open after the first 10 or 15 minutes of cooling off and that's the trade for today. But the warning is that because of F&O expiry and because of the inherent volatility that today will bring, trading on the downside is probably not a good idea except for the best of traders. So the alternative is buy January 4,700 puts and try to hold them during any intraday volatility and if possible carry them tomorrow.

Q: Jain Irrigation has been strong name, rallying some 15% in the last three days. Would it be a good long trade?

A: It is. After all of the declines that it has seen, it's finding support repeatedly and it's coming on our list as a buying opportunity and it's a long trade today also.

Q: We have been talking a lot about the weakness in banks. What about something like ICICI Bank ?

A: The banks will lead the decline, there is no doubt. ICICI Bank has an initial target of Rs 665-670 and probably lower levels after that. It's not just ICICI Bank, I think the Bank Nifty also is a short sell. The entire banking sector is now again likely to see a lot of disarray.

Q: Talking about another big loser in the broader market, Adani Power sold off quite a bit yesterday. You would continue to sell that today?

A: Yes. All the power companies were selling off and I assume there must be a good reason. It's not just technicals, probably something else supported the selloff. The fact that news could trigger such a selloff and then lead to a breakdown of support levels tells us there is more downside in probably all of the power companies and Adani Power for some reason is leading that decline.

So look for a target of Rs 58 and then if Rs 55 cracks, even Rs 50 will go. Some of these charts are just beginning to crackdown and as I have been repeatedly saying, it makes me very worried.

Q: We were talking about JSPL as well yesterday. Would you continue to see a selloff there as well?

A: Yes, because the decline is just beginning. You really want to go short in it and see where it can land up. Some of these stocks are saying we are now starting the second leg of our bear market and that's worrying. JSPL is leading that pack.

Disclosure: I have no investment in any of the stocks discussed.